The UK has lost it's first AAA rating. The others will surely follow.
So what you say?
First, it was a Tory sniffs to commitment not to do so.
Second, that makes this. Resigning issue, but Osborne will not go.
Third, it's a real sign that Tory policy has failed.
Fourth it indicates that Labour has to offer a real alternative and sooner rather than later.
Fifth it may marginally increase the cost of UK borrowing.
However, sixth QE will deal with that. Expect more.
Seventh, it indicates devaluation is likely. I don't forecast a Black Monday although I don't rule it out. I do think significant movement in the value if sterling is likely (below $1.50 and settling there).
Eighth, that may give the economy the boost it needs to start recovery. For Labour this means to back to point four.
Don't doubt this is a big moment, but the outcome is unpredictable. And what Osborne feared most might yet save the economy. But no Chancellor or their party has survived a currency crisis.
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Surely the simplest way to stimulate the economy is not to feff about with bank & big business but to increase the net income received by the middle & lower strata of society – the ones that will actually spend said income – starting the necessary cycle. It’s like an engine.
– have excess income
– spend it
– increasing income for business
– business can expand/employ extra staff
– who have excess income
– rinse & repeat
If no-one has excess income, they don’t spend, the businesses cannot expand as no-one is using them or buying from them, so everything either stagnates or gets worse over time.
Yes, I know it’s simplistic, I never studied economics. But it makes sense.
Oh, and surely boosting the economy (by increasing the income of people again) would be done if we started with a bloody council house building program to replace the ones people like my grandmother bought in the ’80s. As I said, I’m not an economist, but surely building your way out of a recession is more viable than austerity when all of your possible trading partners are in the same or worse state than you.
A friend said I’d make a good “World Mum” – I think I’d need a really big naughty step.
Lady Kayla you may not be an economist, but you have demonstrated far more insight than 99% of neo liberal economists including the ones currently in the Treasury advising this Government!
Labour are bandwagon jumpers, followers not leaders. They’ve had since the last election to suggest alternative policies and all they’ve done is to weakly shadow the Coalition’s economic policy. Right now I’m watching Ed Balls on Sky failing absolutely to suggest any kind of alternative and ceaselessly running down Osborne instead. What would Labour do differently? We’re not being told. Odd, no?
Perhaps this is all part of the Cruddas policy review, Bill. I watched an interview he did on Newsnight recently and apart from saying ‘tentatively suggest’ many more time than was sensible that’s what he said was going to happen.
But personally – and like you – I despair at the lack of alternative economic policy suggestions. Instead we have Balls acting as if he’s back at an Oxbridge debating society. Odd? Maybe. What’s certainly evident is that despite Ed M’s promises they’re finding it very difficult to break from the Blairite mindset.
Cue the Labour party splitting into two, one Blairite Neoliberals, the other, traditional Labour. Quite possibly, after people have had a bellyfull of the Tories, the Labour one would storm in at any next election.
I think a first step would have to be to announce that as the Coalition weren’t elected and had no mandate, all and any agreements international or not (but especially international) were null and void. I’m sure Syzygsyzygsue will be along in a minute to explain why better then I can. For now I’ll just say we’ll need to to get the HNS back, basically.
@Bill Kruse – I have to agree, Bill, and I repeat what I have said often before, both here, and privately: Labour needs to wake up and recognize – acknowledge – the elephant in the room, which is Gordon Brown’s actions and reputation. There are two aspects to this, the one economic, the other social.
Economically, Labour needs to recognize, acknowledge and proclaim LOUDLY that not only did Gordon Brown and Labour NOT trash the economy, they saved it, and that Alistair Darling’s stewardship of the economy was reaping real benefits, until wantonly choked off by Osborne’s neo-liberal nonsense. The public STILL ranks Gordon Brown the worst PM in the last 50 years on the grounds that “he trashed the economy” (see http://www.independent.co.uk/news/uk/politics/david-cameron-fifth-in-poll-of-pms-of-past-50-years-8498160.html) DESPITE the OPPOSITE being true. Labour is SCARED STIFF of being “tarred with the Brownite brush”, despite the fact that it would win supporters if it campaigned for the truth about the 2008 crash. More importantly, it runs the risk of being caught with its pants down, as global public opinion is swinging more and more behind Gordon Brown, as Osborne’s incompetence is being daily more openly displayed.
On the social aspect, have you notice how the appalling IDS has made his REAL target not Blair (whom the Cameroonies recognize as a Thatcher-lite Tory, a sort of “Thatcherism with an almost human face”) but Gordon Brown, and his whole social strategy. This is the target he MUST discredit, if he is to implement his draconian, ideological campaign against the poor, EXACTLY because IDS and the Cameroonies recognize that, flawed though it was, and beset with unwieldy complexity, Brown’s Tax Credit and Pension Credit and Child Tax Fund etc. strategy did at least direct money to those who really needed it, and not away from them into the hands of idle millionaires, who are the REAL benefit scroungers and skivers. And Gordon Brown is proving his worth at the United Nations Special Envoy for Global Education, and his integrity, by donating to charity ALL his earnings outside Parliament since leaving No. 10 (see http://www.dailyrecord.co.uk/news/politics/former-pm-gordon-brown-earns-1117071#.UMcGuAyZLn0.twitter). What a contrast to Tony and Cherie!
Labour need to WAKE up and SMELL the coffee.
I would say the last of the Tory credibility was gone if I thought they had any left before this happened. The point of austerity was supposedly to “sort out the nation’s finances”. Yet this downgrade combined with the announcement that borrowing is to rise next year proves this is a failure. Perhaps supporters of austerity should come clean about what they really want and admit that this is just a cover for removing social protection.
It should be said that the downgrade might not matter too much in the short run. Neither America nor France saw much change in borrowing costs after their downgrade but it does prove once and for all that this Government is incompetent. We really need a new election now, but it concerns me that Labour do not have much better to offer.
Moodys has just downgraded Britain’s credit rating from AAA to Aa1
The Chancellor George Osborne released the following statement after the UK lost its AAA credit rating with agency Moody’s:
Tonight we have a stark reminder of the debt problems facing our country – and the clearest possible warning to anyone who thinks we can run away from dealing with those problems.
Far from weakening our resolve to deliver our economic recovery plan, this decision redoubles it.
We will go on delivering the plan that has cut the deficit by a quarter, and given us record low interest rates and record numbers of jobs.
As the rating agency says, Britain faces huge challenges at home from the debts built up over many many years, and it is made no easier by the very weak economic situation in Europe.
Crucially for families and businesses, they say that ‘the UK’s creditworthiness remains extremely high’ thanks in part to a ‘strong track record of fiscal consolidation’ and our ‘political will’.
They also make it absolutely clear that they could downgrade the UK’s credit rating further in the event of ‘reduced political commitment to fiscal consolidation’.
We are not going to run away from our problems, we are going to overcome them.
— George Osborne
“Osborne’s statement was prepared well in advance, which means Moody’s action was not only prepared and distributed long ago but it got the blessing of both the UK government and Goldman Sachs. And why not: so far it has achieved precisely what it was intended to: crush the Pound. The next question: when does talk of GBP-EUR parity begin?”
http://www.zerohedge.com/news/2013-02-22/uks-george-osborne-responds-moodys-downgrade
Or a more rational way of looking at it is that it puts the UK’s credit rating on a par with the US (a much larger economy) and above that of France.
Which utterly misses the point
As you ‘rational’ people do, usually
Interesting that the Isle of Man has an overall higher credit rating than the UK. If the you need a hand out, you know where to come!
My memory may be failing, but is this not the same Moodys that declared recycled packages of subprime mortgages to be AAA rated? I find it hard to take seriously anything they say, even when they are probably right.
Oh so true
Unfortunately they are still afforded influence
I worry a bit, because I think the UK’s debt is higher and our economy is even more “financialised” than either the US or France. Surely if the risk of one currency collapsing is a possibility, then Sterling must be first in the queue.
I think the UK is just entering what could be downward spiral with bad economic news prompting a further downgrade etc etc. Unless something radical is done to stimulate the economy, then a “Black Monday” is not that far off!
Anyone for scrapping the “Millionaire’s Line” between Birmingham and London, which is really just for “big” business and senior politicians (think Zil Lane on a motorway) and instead starting a massive house building program? Surely there is a real need for the latter and £32 billion or whatever the HS2 line price tag is would be sufficient to construct a significant number of houses?
Part and parcel of the EU “TENS” network. As such it is the individual states responsibility to construct.
the fear I have is that Labour will win the next election without any need to change the neoliberal beliefs which the leadership still hold. The fact that Miliband did not choose Balls to start with, and the ridiculous choice he did make, shows that he does not have a clue about what to do himself. I just wish he had considered Andy Burnham for the Shadow Chancellor position: one, because he had Treasury experience and was open to knew ideas (e.g. land value tax); two, because the Mid Staffs disaster showed him to be not up to the health brief.
If he could not do health he can’t do the economy
Pity that Kelvin Hopkins would never be considered for the job.